NRCGT penalty

In July 2016 I found out that my client (who lives in Indonesia) had sold a UK buy to let property in October 2015. I immediately sent in a NRCGT return online. He now has a penalty notice for £1,300 for not sending in the return within 30 days of the conveyance. The gain returned is £204. The fine seems to me to be disproportionate and unjust because he, not unreasonably, expected to return the details of the gain on his 2016 tax return in the normal way. With hindsight I can see that I should have flagged this up just because he is a non resident landlord in case he happened to want to sell a property. I am looking for reasonable excuses to appeal this and pointed out that knowing he is non resident his solicitor should have warned him about the 30 days. The solicitor is well respected locally and has replied candidly that he knew nothing about the 30 day time limit and to be fair neither did I at the start of the 2015-16 tax year. I know that not knowing the rules is no excuse but this seems so unfair. If professionals don’t know about new online reporting rules how can the tax payer in Indonesia (where communications are not the best) be expected to know? Is there any way to challenge this and is anyone else in the same boat?

Hi Angela
My name is David. I would be very interested to hear how your clients appeal went. My wife and I have lived in Australia for 5 years. We sold our property in September 2015 and the exact same thing has happened to us appart from, we were joint owners of the property and we have been hit with a £1300 fine EACH. We made a slight loss each on the sale. We have just got our fine notification and have not lodged the appeal yet.
Regards
David Cox

I have successfully appealed against a NRCGT penalty. The wording of my letter was as follows and it was accepted without question:

"Further to your email of 17 June 2016, we write to appeal against the penalty of £800 issued to our client for the late submission of the non-resident capital gains tax return.

The circumstances are as follows:-

Our client has been living in Australia since 2012, during which time he rented out his property. The income has been declared on my client’s income tax return each year.

Due to my client’s absence from the UK, he was unaware of the new rules that came into force on 6 April 2015, requiring the CGT return to be completed within 30 days of the date of sale of the property. Hence, no CGT return was completed when the property was sold in November 2015.

When it came to our attention, the non-resident CGT return was filed without delay. You will see from the return that there is no tax due and therefore there has been no loss to HMRC. Both we and our client apologise for the delay in filing the return but are confident that you will be able to see that it was not a deliberate action.

We trust that, in the circumstances, the penalty can be removed.

In the meantime, our client has paid the amount due and so, if our appeal is successful, we should be grateful if this amount could be refunded as soon as possible."

When I heard George Osborne this morning referring to terrible policy, I had hoped he was talking about the NRCGT return filing requirements that he introduced. Sadly, he was talking about the Tory Manifesto document, although pot and kettle did spring to mind and that indeed was without any mention of a Cornish pasty.

HMRC has at least recognised that previously law abiding taxpayers were unaware of the filing obligation and agreed to cancel all daily penalties that have been charged in respect of late NRCGT return filings (usually £900). Available figures show that 36% of all taxpayers who have filed a NRCGT return did so late. The actual percentage of taxpayers who did not file an NRCGT return on time must surely be even higher because an unquantifiable number may still not yet appreciate they should have filed this return (or incorrectly decided not to do so, given the £1,600 penalties HMRC were charging once a return was filed late).

The news of the cancellation of the daily penalties was broken by a taxpayer who followed advice on a forum to write and complain to his MP. I would therefore urge all affected taxpayers to write to their MPs particularly as another election may follow later this year.

Many taxpayers who have filed an NRCGT return late will still face fixed penalties of £700. Whilst some taxpayers have managed to have these cancelled (for reasons HMRC are unwilling to discuss, even though seemingly identical cases have had penalty appeals refused), those who are unsuccessful will need to show they had a reasonable excuse for filing late to have the remaining penalties quashed. If an individual's lawyer (professionally trained in dealing with property disposals) has not heard of the return/flagged the filing requirement, the individual may have a reasonable excuse because they were relying on a professional to tell them what they needed to do. Indeed, is it reasonable for HMRC to expect taxpayers to read their website on a daily basis to glean knowledge that their own capital gains tax technical staff openly admit is outside their own knowledge? It will be interesting to see how this situation develops.

My name is Rik, I don't know how to join, or if I even should be allowed as a layman. Great article in the link above. I commend Lee for his sense of humour and genuine desire to see HMRC live up to its own aspirations. I now live in Canada and have many times praised the pragmatic approach to taxation in the UK. Sadly, despite my best attempts to be honest, whilst not employing a tax professional (!), I find myself (and my wife, yes, they double down on the same transaction!) a victim of this scam. I would try and get the money back from my solicitor, but honestly, conveyancing is really quite reasonable in the UK and I feel bad for trying to get back about twice the amount I paid them in fees! We declared the sale in our Canadian tax returns, thus proving, I thought, that we were not thieving tax avoiders (we owe no UK tax). Canada and UK certainly share tax information, so would this not count in my favour? Of course not. I would really like to test this in a tribunal, but I have to employ a representative or travel to the UK myself (and my wife). Can you imagine? For 700 pounds each? Less than the air fare. The tribunal system did not consider people travelling from abroad, because, ...... they don't pay tax in the uk generally...... Can we try a class action type approach? I'm afraid I have no clue how to do this. Would Gina Miller help us???

Do I have to attend a hearing?

HM Courts & Tribunals Service provide guidance (leaflets T242, T243 and T244 – use the link to court and tribunal forms) on what happens after you make your appeal and on what happens at a hearing. We recommend that you read this in addition to our guidance below.

At the level of the First-tier Tribunal, there are different ways in which your case can be handled depending on the facts, such as what it is you are appealing about and how complex your case is.

Some cases are usually dealt with on paper. This means that the tribunal will just review papers submitted by HMRC and by you, and make their decision from those.

If your case is to be dealt with in this way, it is important that your papers are neat and tidy so that the tribunal can follow them. Read the section ‘How do I prepare my case?’, which guides you through organising your papers. If you are told your case will be dealt with on paper, but you would prefer to have a hearing, you can request one.

If you have any special needs, which they might need to cater for at the hearing, for example, if you have a disability, you should tell the tribunal in advance.

Thank you. This is Rik again. By using 'we' above this must be someone from HMRC.

I have lodged my appeal to the Tribunal. I haven't seen any tribunal cases relating to this topic so I may be the first.

Leaflet T242 is very useful but it is clearly written assuming the appellant is resident in the UK! In fact, the tribunal system assumes one is resident in the UK or has a resident professional adviser. Section 8 states that costs are not normally awarded. If I pay for a representative and win then I lose the money. The fine is 700 pounds. Why would I have ever employed a tax professional when at no time did I ever owe any taxes? I will continue representing myself.

Hopefully, it will be a paper review. Even so, HMRC have 42 days to respond to me and then I have 30 days to counter. The letters from HMRC take 20-25 days from the date on the letter to the letter reaching my home. It is virtually impossible to meet that deadline unless I can send it back electronically.

If is is a hearing, we will have to fly to Birmingham and stay in a hotel. (Again, no costs likely to be awarded). I am only promised 14 days notice, though they will 'try' for 30 days, on a letter that takes 20-25 days so my chances of making it are slim. Assuming I make it, what if the appeal runs late? My wife has to appeal separately and what if we are not on the same day? If we win this time, we will really lose lots of money.

If HMRC win, the British tax payer will have lost more money than the fines (even with the paper process). Don't forget that there was never, ever, any tax due on the sale of our former home.

Why are myself and my wife treated as separate cases, on the same transaction, with virtually identical evidence? This double the costs for everyone.

"We" is definitely not HMRC! I just copied and pasted a few paragraphs which I thought might help.

One of the most respected expatriate tax advisers in the land thought cases such as your own were worth fighting on the grounds that if large numbers of qualified legal people who specialise in this area have never heard of the NRCGT return filing requirement, is it reasonable for HMRC to expect a man in the street to know about it. As the taxationweb article highlighted, HMRC did not mount a great advertising campaign as they did for self assessment, or offer a penalty holiday as they have already announced for MTD.

Please keep us updated of your journey as this process is not a regular event for most taxpayers/tax advisers. Any insight will be interesting for those affected by this Government attack on previously law abiding taxpayers.

I was getting quite excited when the first 2 appeals went in favour of the taxpayer. I am now dismayed to see HMRC have pulled it back to 2-2. I think my appeal is up next. Look out for BRADSHAW, Richard (and they agreed to include my wife, Alison, in the same review. (Interesting as she had to file an SA and I was never asked to. No idea why, but I would never have known about it to this day if she hadn't).

Thank you to everyone on this forum for your help (this is Rik again). I have just receive notice that our joint First Tier Appeal was successful. It will be published online in due course - Richard and Alison Bradshaw, reference, TC/2017/05443 & 05443.

I have been keeping score and it is running at 6-4 in favour of the appellants.

Having never been involved in any legal proceeding like this I must say I did not expect the findings to be so wildly inconsistent,

For those waiting for their appeals to be heard I can tell you how it will go depending on which judge you get.

If you get Judges Thomas (my favourite) or Connell they will likely find that it is a reasonable excuse to not know about the strange new reporting requirement.

If you get Judge Shephard you may get some of the fines thrown out due to a technicality over multiple paragraphs applying.

Judge Brannan will only find for you if you asked your accountant, but not if you only relied on a solicitor ????

Judges Mosedale and Scott will find for HMRC.

(To be fair Judge Mosedale did have some sympathy for a chap who sold 3 properties and was hit with 3 sets of 3 fines on the same day and only allowed the first set of 3 fines to stand.)

Does anyone know if this is going to second tier to sort this mess out? What a huge waste of taxpayers money.